Why this is critical: California’s labor force participation rate — which includes both the employed and job-seeking unemployed — is a crucial indicator of overall job levels, providing the fundamental economic basis for all real estate activity.
Jobs mean income, and their income is your income
The labor force participation (LFP) rate is the percentage of California’s population who are employed, or unemployed but actively seeking employment.
Jobs bring in the income needed to rent or buy a home, and acquiring a home means a rental or sales transaction — for brokers that’s fees. The level of jobs throughout California’s population, the basis for real estate transactions, is tracked by our LFP rate which includes the job-seeking unemployed. The remainder of our population do not directly participate in producing the state’s gross domestic production.
Presently, the LFP rate in California’s population is in a downward trend after peaking at 67% in 2000.
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Real estate runs with the labor force participation rate
Our aging population contributes to the decline, though damaging drops occurred in the recessionary periods of 2009 and 2020. Further, the California population is slipping, as it always does cyclically in a recession.
During the years between periods of downturn, California’s LFP rate remains roughly one percentage point below the U.S. average. In 2025, the two rates will converge, as the U.S. LFP falters while California’s slow LFP recovery continues. For June 2025, California and the nation are both at about a 62% LFP rate.
When unemployed individuals drop out of the workforce by no longer seeking employment — generally the long-term unemployed — a false impression of an improving jobs market is created. The unemployment number in the LFP drops. However, the more important statistic is what is happening to the number of individuals employed — did it drop, rise or hold steady?
Employed consumers rent and buy homes, and their employers rent or buy commercial space needed for employees.
California employment — jobs — grew from a pre-pandemic peak in December 2019 of 17.7 million employed individuals, reaching an all-time high of 18.2 million in December 2024. However, in June 2025 our statewide employment figure sits at 18.1 million and is trending down.
Brokers who watch the jobs numbers along with the LFP rate will find the trends useful for forecasting their future brokerage conditions — no need to be concerned about the unemployment rate as the unemployed have no income.
The trend of the employed in California’s population has the most impact on the vigor of the real estate market, during good markets and bad.
Further, when a jobholder considers a home to rent or buy, their financial decision to acquire a possessory interest in real estate is significantly influenced by their annual gross income from employment.
A paycheck is the primary financial base for an individual’s ability to qualify to lease a residence or obtain mortgage funds to buy a home.
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Jobs move real estate
Income means housing
Households respond to changes in their income by adjusting monthly housing expenses and location choices.
During periods of economic growth, local construction of homes and apartments increases to meet the growing demand for housing — not met by for-rent and for-sale inventory — resulting from the voluntary turnover of tenants and owners.
Reductions in local employment normally lead to lower rents and prices paid by tenants and buyers for the occupancy and use of all types of real estate, with rent for housing being the most stable.
Areas with higher LFP rates support higher absorption rates for properties available for rent or sale.
A sustained dip in LFP rates contributes to reduced transaction volume, especially in lower- and middle-income brackets.
When employment falters, the result is:
fewer leases signed; andslower sales closing for housing.
Additionally, buyers who are employed qualify for mortgage financing, with the amount of borrowing dependent on their household’s gross income.
Renting or buying means broker fees
Regional differences in LFP growth are used by agents and brokers to assess areas more likely to lead to more real estate transactions. Here, branch office operations come into play.
With lower absorption rates, brokers and agents observe:
lower turnover;fewer sales; andreduced fees.
In conclusion, a stable, rising LFP rate supports enhanced brokerage income flows. A higher LFP helps a broker in search of a client — more fees, more often.